Lithia’s Q2 net profit increases despite lower new vehicle sales

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Despite a drop in new vehicle sales, Lithia Motors Inc.’s net income increased in the second quarter.

The growing dealership group benefited from higher used vehicle sales and double-digit percentage gains in gross margin per new vehicle sold, finance and insurance income and higher average selling prices of new and used vehicles.

Net profit jumped 11 percent at $337.6 million, as revenue rose 20% to $7.2 billion, a second-quarter record, the Medford, Oregon-based retailer said Wednesday.

“The second quarter results demonstrate the diversity and strength of our businesses as we achieved the highest quarterly revenue in our history,” Lithia CEO Bryan DeBoer said in a statement.

Even as Lithia expanded its dealer network through a rapid pace of acquisition, new vehicle sales fell 8.5% to 68,752. Used vehicle sales, however, rose 15% at 81,026.

Lithia, the nation’s second-largest new-vehicle retailer, said the average selling price of each new vehicle jumped 13% to $47,281, while the average selling price per used vehicle rose by 21% to reach $30,976.

Average gross margin per new vehicle climbed 43% to $5,970 in the second quarter, while average gross margin per used vehicle fell 11% to $2,955.

Lithia also remained active in the dealer buy-sell market in the second quarter.

In April, Lithia sold a Honda store in Texas. In May, the retailer bought a Honda dealership near Toronto and divested itself of a Montana Subaru store.

In late June, Lithia purchased 10 dealerships in three transactions in South Florida and Nevada.

And last week, in the third quarter, Lithia bought a Ford store in Northern California.

Lithia’s dealership acquisitions in the second quarter, along with the July acquisition, are expected to generate combined annual revenue of $1.2 billion, the company said.

Annual revenue from the dealerships it has acquired so far this year has reached $2.3 billion, Lithia said.

The retailer said it had acquired dealerships representing $12.7 billion in annualized revenue since July 2020, when it revealed its five-year plan to reach $50 billion in annual revenue by 2025, nearly quadrupling the 2019 revenue of $12.7 billion.

Shares of Lithia were trading down around 3% by mid-morning at $286.27.

Q2 turnover: $7.2 billion, up 20% from the previous year

Q2 net income: $337.6 million, up 11% from the previous year

Q2 adjusted result: $355 million, up 12% from the previous year

Vehicle sales: Lithia sold 149,778 new and used vehicles in the second quarter, up 3%. On a comparable basis, Lithia sold 119,023 new and used vehicles in the second quarter, down 14%.

Recordings: Second quarter revenue and earnings per share

Ranking: Lithia ranks #2 on Automotive News‘ list of top 150 US-based dealer groups, selling 260,738 new vehicles in 2021.

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